Published: Sun, June 10, 2018
Markets | By Otis Pena

Oil Prices dip on fall in China demand

Oil Prices dip on fall in China demand

The surge in USA production has pulled down WTI into a discount versus Brent of more than $11 a barrel, its steepest since 2015.

Brent crude futures settled up $1.96 a barrel, or 2.6 percent at $77.32.

Further weighing on prices has been rising US output, which hit another record last week at 10.8 million bpd.

Crude prices were down slightly earlier in the session after data suggested Chinese demand was waning and concerns lingered about growing US output.

West Texas Intermediate for July delivery declined 21 cents to settle at $65.74 a barrel on the New York Mercantile Exchange. Gains grew when Algeria's oil minister indicated OPEC would focus on balancing the market rather than on rolling back production caps.

"We're going to be subject to incredible headline risk", said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. "With this more than 10 percent (price) fall, they may reconsider things as we come closer to the meeting".

An economic crisis in Venezuela is curtailing the country's oil production, while a planned reinstatement of US sanctions against Iran also is expected to impede production from OPEC's third-largest member.

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In Venezuela, chronic delays and production declines could soon breach state-run PDVSA's supply contracts.

Kazempour Ardebili made the comments in response to reports that the U.S. government had quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about one million barrels a day.

Iran has called on Opec to discuss what it called "illegal" sanctions at the next meeting on June 22, which is due to debate production policies.

The cause of Friday's losses is ironic considering so much focus has been paid over the past few weeks to the widespread argument that the crude market is tightening rapidly (due to dramatic declines in output from troubled major producers such as Venezuela), and to the point where even the mighty USA shale industry won't be able to meet demand.

OPEC-member Iraq said on Wednesday a production increase was not on the table.

"After Saudi Arabia and Russian Federation made the suggestion that OPEC starts lifting output in the second half, the market has been on its heels", Danske Bank A/S senior analyst Jens Naervig Pedersen said in Copenhagen.

"Venezuela's worsening economic crisis, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices", Abhishek Kumar, Interfax Energy senior analyst said. The countries are now the two key oil supply concerns globally that supported the oil price rally in recent weeks, before Saudi Arabia and Russian Federation hinted at discussions that they were considering reversing some of the cuts to offset production losses and "ease market and consumer anxiety".

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